Small business and the law

Small businesses can’t avoid the law. From the moment of company incorporation rules and regulations are everywhere, and how small businesses therefore deal with matters which have a legal dimension is clearly going to be vital to their development and growth.

Limitations on budgets, the unknown element typically associated with legal fees, and a lack of legal expertise within the company can quickly add to the difficulties businesses face when getting going and starting to grow.

As small businesses make up close to 99% of all private sector and non-profit enterprises in the UK it is obvious how important the law is in relation to a very important group in the economy. Dealing with unwanted legal issues can not only take time from the business but can more importantly sap the energy of those involved and in those early stages energy is a precious commodity.

What laws do I need to comply with?

New and amended laws are usually brought into force each year at the start of April and October. However, the Government has recognised the burden that regulations impose on small businesses. The 2011 moratorium on new business regulation has been replaced by the Small and Micro Business Assessment. It assesses all new, proposed regulations and if they are found to have a disproportionate impact on businesses of less than 50 employees they will only be implemented if such small businesses are exempted.

The good and the bad of small business law

Although the rules and regulations that small businesses come across may often feel like a burden to deal with, legislation does play a key role in protecting important areas of business life.

The areas of business ownership, trading, employment and intellectual property to name but a few, have rules and regulations affecting them which protect the rights of those involved. Without them the business world simply couldn’t function fairly and effectively.

With the rules unfortunately though comes the reality of having to deal with them, and with government agencies and departments often not speaking to each other and thereby requiring companies to submit the same information time and time again, valuable time is taken away from running a business. This can prove a frustrating experience and sour business people’s view of the law.

A 2013 YouGov survey of nearly 10,000 small businesses also calculated that the loss to small businesses, for each legal problem that had an adverse effect on their business was £1,200. That is money founders, when setting up a company, can ill afford and again adds to the frustration of dealing with the law.

Ways to handle legal matters

Complying with the detail of the law is often viewed with fear by those setting up, or developing, a business in its early stages. Further engaging lawyers as a means to handle legal matters is often met with a degree of derision amongst small business owners. Indeed the same 2013 YouGov survey found only 1 in 8 of those asked said that they sought help from a solicitor when dealing with a legal problem with 45% also responding that lawyers did not provide a cost effective means to resolve legal issues.

Meanwhile research from the Legal Services Consumer Panel has highlighted that just 57% of consumers consider they got value for money the last time they bought legal services.

However many find a way through and although the legal needs of individual businesses clearly depends on their individual circumstances, legal know-how, when engaged effectively, can provide a valuable guiding hand through more complex legal issues..

Critically also the Internet, new technologies, and the shake-up of the legal industry with the Legal Services Act allowing non-lawyers to now own and provide legal services through ‘Alternative Business Structures’, is inevitably going to make it easier for small businesses to interact with the law.

Already companies such as Lightwork Business, are offering online legal documents, allowing small businesses to buy important documents, including shareholders and non-disclosure agreements, tailored to their individual circumstances and at a fixed price.

Other online offerings, again including Lightwork Business, are also creating banks of legal knowledge and experiences for people and businesses to share and benefit from, or comparisons of legal professionals and services for businesses to engage with directly.

Advances such as this can only help, and small limited companies can expect to continue to benefit from simpler ways to deal with legal issues for some time to come as the legal sector finally comes to terms with the impact of the Internet on the delivery of legal services.


Please note the information on this website does not constitute legal advice.

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